Retirement planning is all about smart financial planning and taking the necessary steps to build a corpus. Read on to know more about the benefits of early planning.
Remember the phrase, ‘the early bird catches the worm?’ When you talk about retirement planning and investment, the phrase heads the nail on the head. It is simple logic – the earlier you start an investment, the more time you get to stay invested and, consequently, a higher chance of building a larger corpus. However, most people in India don’t think of retirement when they are young in their 20’s or 30’s. But, it is important to start planning your retirement as early as you can.
Let us look at the benefits of early retirement planning:
- Protection against medical emergencies
As you grow old, you must become more susceptible to illnesses, and you may need frequent hospitalisation. Today, in the purview of the rising medical inflation, the treatment cost for some diseases can easily run into several lakhs. Without proper financial planning, it would be impossible to meet the expenses from your pocket. Investing in your retirement plan early when you are healthy can help you save a significant amount and pay your health bills without depending on anyone.
- Be prepared for contingencies.
An emergency can occur at any time. When life throws a curveball at you, you must be financially well prepared to handle the situation. Investing in a retirement plan can give you the security to move through the different stages of life smoothly. Additionally, you can pledge your retirement fund for a short-term loan in the face of an emergency and immediately get the necessary funds. Thus, early retirement planning can help you in many instances.
- The power of compounding
When you plan your retirement early, you give yourself and your money enough time to grow with a compounding effect. By starting early, you can put aside a small amount every month and still build a significant corpus over 15-20 years, as compared to investing more money and starting late.
- Support dependents
If you are the sole breadwinner in your family, you have every reason to start planning your retirement as soon as possible. During your working span, you may want to build a good corpus for your family so that they can have a secure financial future. However, in the event of any unfortunate mishaps, their future may become uncertain. The best way to secure the dependants’ future is with the help of an insurance-based pension plan.
- Tax benefit
Paying taxes is an obligation, and it can be a huge liability as it takes away a part of your income that you can otherwise enjoy spending. You can reduce your tax outgo every year while securing your future by investing in a retirement plan. The premium you pay towards the pension plans is eligible for tax benefit under different sections of the Indian Income Tax Act, 1961.
The earlier you start investing in your retirement plan, not only do you build a corpus for the future, but also you save a significant amount on your annual tax payment. Additionally, when the time comes to withdraw funds from your retirement corpus, the withdrawal is exempted from tax, depending on the plan you have. As they save, a penny saved is a penny earned, you will have more money to spend.
Today, many people in India are looking to retire early; they don’t want to wait until they attain the official retirement age. If you, too, are looking for early retirement from your work and wish to pursue your other goals in life, early retirement planning is vital to get the financial security you need.